The department will postpone the publication of the rule to
early 2011 from Nov. 1 to review public comments and host
several meetings and hearings, Duncan said in an interview
yesterday. The proposal, called gainful employment, requires
for-profit colleges to show their programs improve job prospects
or lose eligibility for funds. The rule remains scheduled to
take effect in July, 2012, he said.

“We have 90,000 comments and we want to do it justice,”
Duncan said. “We’re going to read every single one.”

The proposal has provoked a letter-writing campaign from
for-profit colleges and opposition from at least 80 members of
Congress. The Education Department says the rule is necessary to
ensure taxpayer money isn’t wasted and that graduates aren’t
saddled with debt for programs that don’t improve their job
prospects. For-profit colleges say the regulation would hurt
low-income students.

“We’re very pleased that the secretary has delayed the
rule,” said Harris Miller, president and chief executive
officer of the Career College Association, a Washington-based
industry group in a telephone interview. “We’re also glad to
see that the department is willing to have further dialogue with
stakeholders.”

‘Misleading Folks’

Lobbying by for-profit colleges “is putting incredible
pressure on policy makers,” said Sarah Flanagan, vice president
of the National Association of Independent Colleges and
Universities in Washington, which represents private nonprofit
institutions. “It simply shows that many of these colleges
wouldn’t have been able to meet the gainful employment test.”

For-profit colleges are an important part of the U.S.
education system, Duncan said.

“If folks are producing a great education and making a
dollar from that, I don’t have a problem,” Duncan said. “Where
they are misleading folks, we have a problem.”

The Education Department will still issue 13 other rules on
or about Nov. 1 intended to protect students at for-profit
colleges, the agency said in a statement. For-profit colleges
will be required to provide applicants with information on
graduation and job placement rates. The department also will
strengthen sanctions against colleges whose recruiters mislead
students, according to the statement.

Circumventing Law

If the gainful employment rule were in place today, about 5
percent of all for-profit college programs would no longer be
eligible for federal student aid, according to Education
Department estimates.

Duncan is concerned that for-profit colleges are getting
around a 1992 law that caps at 90 percent the proportion of
revenue they can receive from federal aid, he said.

While the law was intended to ensure that for-profit
colleges enroll students who are paying out of their own
pockets, some of those colleges are recruiting veterans and
active-duty military whose federal benefits don’t count toward
the ceiling.

For-profit colleges should have “some skin in the game
beyond our dollars,” Duncan said. “You want some viability
beyond what’s coming from the federal government.”

An index of 12 education companies including Phoenix-based
Apollo Group Inc., the biggest company in the sector by
enrollment, has declined 17 percent in the 12 months ended Sept.
24.

Republican Plans

Speaking in a separate interview for Bloomberg Television’s
“Political Capital with Al Hunt,” Duncan said the Republicans’
plans to cut federal spending “would be a blow” to efforts to
improve the nation’s education system through programs such as
the $4.35 billion “Race to the Top” initiative.

“It’s not something that I can begin to support,” Duncan
said on the program that airs this weekend.

House Republicans, who polls show making gains in the Nov.
2 elections, announced a governing agenda Sept. 23 that would
roll back non-security discretionary spending.

“We have to continue to invest, and so that would not be
helpful,” Duncan said.

Duncan said his confidence in the benefits of merit pay
wasn’t shaken by a Vanderbilt University study that found
students of middle-school math teachers offered bonuses didn’t
do better than those who had teachers who weren’t eligible for
extra money.

The study “didn’t look at how these kinds of resources
help bring the next generation of talent into public
education,” Duncan said. “The big thing it didn’t talk about
is how you get your hardest working, your most committed
teachers to go to underserved communities.”